Which Statement Is Correct About the Retail Inventory Method

question 35

Multiple Choice

Which statement is correct about the retail inventory method?

• A)It represents a cost flow assumption.
• B)It estimates cost of goods sold by applying an average gross margin to the amount of sales recorded in the period.
• C)It can misstate inventory values if unreliable information is used about profit margins.
• D)It provides direct information about actual cost of goods sold or ending inventory.

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Definitions:

Pricing Impact

The effect of pricing strategies on consumer demand, sales volume, and ultimately, company profitability.

Pricing Constraints

Limitations that affect how a company can set prices for its products or services, which may include costs, competition, demand, and legal issues.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a given time period.

Marketplace Conditions

The various factors and conditions that affect the dynamics of buyers and sellers in a particular market, including competition, customer demand, and regulatory environment.